I was talking with a potential client a few months ago. He wanted to wait until he received his tax refund before setting up a retirement savings plan. He was planning on using his tax refund to do some much needed repairs on his house. I hear this a lot around tax time. It seems obvious to me, but it seems like people just don’t realize that a tax refund is just the government returning your money.
In this case the client was expecting to get a $3,000 refund. I was shocked. I explained to him what that means in terms of the money he is letting the government use every day that he cannot use. In his case, $3,000 equates to $250 per month.
If he would simply talk to an accountant and find out exactly how many allowances he should take given his income and the amount of the refund, we could free up $250 per month that could be invested or saved for retirement.
A 35-year-old putting $250 per month into an over-funded equity-indexed UL could save enough to generate $35,000 per year in TAX-FREE retirement income starting at age 66. $35,000 of income for retirement without changing spending habits. Imagine what you could save if you put your mind to it!